Real estate investors looking for environmental performance indicators can typically rely on some standards in the Canadian market. JLL’s newly released 2016 Real Estate Environmental Sustainability Transparency Index places Canada among 16 countries deemed to be transparent, yet falling short of France, Australia, Japan and the United Kingdom’s highly transparent status.
A growing focus on measuring, verifying and reporting on corporate sustainability efforts makes for an expedient companion metric to JLL’s longer standing and more broadly based Global Real Estate Transparency Index (GRETI), which weighs 139 factors related to availability, disclosure and oversight of financial information and investment procedures. Now in its third iteration, the Sustainability Transparency Index uses a different scoring system tied to the availability of voluntary or compulsory methods of demonstrating a building’s energy and environmental performance. This year, 37 countries were assessed, up from 33 in 2012, but still only representing about a third of the total GRETI survey field.
“There continues to be evidence that sustainability considerations are becoming more widely established, although the pace of progress in creating new tools and regulations is slow,” the accompanying report notes. “There are encouraging signs that two cornerstones of environmental performance transparency — minimum energy efficiency standards and green building certification schemes — are available in the majority of key markets.”
The index identifies seven different approaches for promoting, tracking and/or regulating building performance, including: green building financial performance indicators; building certification; carbon reporting; energy use benchmarking; green leases; and energy efficiency requirements for new and existing buildings.
Countries rated highly transparent have more legislated decrees than Canada’s predominantly voluntary programs. For example, France, Australia and the United Kingdom require carbon reporting, while France is unique in mandating green leases.
However, Canada’s institutional investors emerge as sustainability innovators as one of the handful of countries (along with France, New Zealand and Australia) with a green property index, which compares returns on green certified buildings against a broader index of directly held real estate assets. They also number in the growing participation in the Global Real Estate Sustainability Benchmark (GRESB), which the JLL report calls “another encouraging sign” that institutional investors are increasingly interested in evaluating energy and environmental outcomes in their portfolios.
“The (GRESB) rating stood at 56/100 last year. This is a comparable score to the GRETI sustainability average (2.99), which also stands just around the middle of its overall scale of 1-5,” the report notes. “Both metrics seem to indicate that there is still a long way for the real estate industry to evolve towards being a more transparent investment environment in regards to the sustainability characteristics of their assets and portfolios.”
Canada’s partners in the recently announced North American Climate, Clean Energy and Environmental Partnership are also represented in the 2016 Sustainability Transparency Index. Like Canada, the United States is rated transparent while Mexico is categorized as having low transparency, but some elements of the three countries’ joint action plan could potentially filter through to the next index results in 2018.
Notably, it includes: a commitment to prohibit or limit the use of some hydrofluorocarbons (HFCs) with high global warming potential; a pledge to promote the ISO 50001 energy performance standard in the industrial and commercial sectors; and strategies to support the Paris Agreement on climate change mitigation and adaptation. From a sustainability reporting perspective, the North American partnership also tackles the practical issue of integrating and aligning data, which is likewise fundamental to global transparency.